Policy News Update

OFFSHORE DRILLING IN GULF FINDS OIL RESERVES

An announcement by three oil companies of a successful production test in the Gulf of Mexico — potentially the largest American oil find in a generation — was seen by policy experts as ushering in a new era in ultra-deepwater offshore drilling.

Chevron, Devon Energy and Statoil ASA, the Norwegian oil giant, reported that they had found 3 billion to 15 billion barrels in several fields 175 miles offshore, 30,000 feet below the gulf’s surface, among formations of rock and salt hundreds of feet thick.

While it is too early to know exactly how big the fields are, the oil companies expressed hope that they had the potential of being even larger than those at Prudhoe Bay, off the northern coast of Alaska.

The United States has reserves of 29 billion barrels, meaning that at the high end of the estimates, the discovery could increase reserves by 50 percent. It comes as the output of oil and gas in shallower wells in the Gulf of Mexico, with about one-quarter of American oil reserves, is ebbing and environmental resistance to offshore drilling in areas closer to coastlines remains strong. And given that the United States uses 20.5 million barrels of crude oil a day, the new areas at most hold supplies that would quench the nation’s oil thirst for two years.

Because the new reserves are so far off the Gulf Coast, they seem unlikely to attract opposition from those who oppose drilling close to beaches.

CALIFORNIA LAWMAKERS AGREE ON EMISSIONS BILL

The California Senate approved a bill that would make the state the first in the nation to cap industry's greenhouse gas emissions. The full Assembly is expected to pass the bill, and Gov. Arnold Schwarzenegger (R) has pledged to sign it into law.

A.B. 32, the "Global Warming Solutions Act," would force industry to reduce its carbon dioxide and other greenhouse gas emissions by 20 percent by 2020, starting in 2012. The agreement between Schwarzenegger and the bill's Democratic sponsors incorporates the governor's request for a mandatory carbon credit trading market to help businesses meet their quotas, as well as his desire for an economic "safety valve" to delay the emissions cuts in case of natural disaster, energy shortages or other extenuating circumstances.

"The state is the 12th largest carbon emitter in the world despite leading the nation in energy efficiency," Schwarzenegger said. "Reducing greenhouse gas emissions is an issue we must show leadership on."

Environmental groups and some business leaders, including utility Pacific Gas & Electric, said they supported the bill. But some businesses have taken an active lobbying role to oppose the bill, and the state Chamber of Commerce ran radio ads against the measure. "If our manufacturers leave, whether for North Carolina or China, and they take their greenhouse gases with them, we might not have solved the problem but exacerbated it instead," said Allan Zaremberg, President, California Chamber of Commerce.

Said Greenpeace spokesman Steve Sawyer, "It's an old saying, but I think it's still true: Where goes California, the rest of the country will follow in another five or 10 years."

APPEALS COURT SAYS EPA ACTED LEGALLY ON METHYL BROMIDE

A federal appeals court ruled that the U.S. Environmental Protection Agency (EPA) did not break the law by allowing producers, distributors and users of methyl bromide to increase the amount of the pesticide they use annually.

The case stems back to 2004, when EPA issued a directive allowing new production and consumption of methyl bromide, as well as the use of existing stocks, per the March 2004 dictates of the international agreement governing worldwide methyl bromide use called the Montreal Protocol on Substances that Deplete the Ozone Layer.

Every year, the amount of methyl bromide that U.S. growers are allocated declines under the terms of the Montreal Protocol, which requires all methyl bromide use to be phased out in the United States by 2005. But critical uses of the chemical -- when the absence of methyl bromide would cause significant market disruptions -- are still allowed.

The court ruled that an international treaty could not be considered a federal "law" and as such was not enforceable in federal court.

An EPA spokesperson said the agency was "pleased with the court's decision" and that the Bush administration "remains committed to finishing the job of restoring and protecting the ozone layer, protecting public health and meeting critical needs of American farmers as they make the transition to methyl bromide alternatives."

BP WHISTLEBLOWER CLAIMS EXECS LIED ABOUT PRUDHOE PIPELINE

As lawmakers gear up for a number of hearings on the BP pipeline corrosion that led to the partial closure of Alaska's Prudhoe Bay oil field, an industry whistleblower accused high-level executives at the oil giant of lying about problems within the company and urged Congress to order an independent audit.

Speaking at a press conference in Washington D.C., Chuck Hamel, an advocate for BP employees in Alaska, told reporters that concerns about a corrosive pipeline at Prudhoe Bay existed for years but that secrecy, inept management and concerns about cost prevented corrective action. Hamel also accused Alaska regulators of helping to conceal a problematic pipeline maintenance program.

In a letter sent to House Energy and Commerce Committee Chairman Joe Barton (R-TX), Hamel accused BP of "cooking the books" to conceal problems in the Trans-Alaska Pipeline System (TAPS). The letter also accused the Alaska Department of Environmental Conservation (ADEC) of conspiring with BP to hide alleged problems with the Prudhoe corrosion inspection program.

BP and Alaska officials have outright denied Hamel's allegations.

SENATORS URGE EPA TO STUDY HAZARDS CAUSED BY PARKING LOT SEALANT

Sens. Jim Jeffords (I-VT) and John Warner (R-VA) urged the U.S. Environmental Protection Agency (EPA) to turn its attention to a little-known and surprising health hazard: parking lots.

Specifically, the senators are concerned about coal-tar sealants, or the black and shiny emulsion painted or sprayed on the asphalt pavement often used in parking lots. Contamination from the sealants comes from a group of chemicals called polycyclic aromatic hydrocarbons (PAHs).

Studies from the U.S. Geological Survey (USGS) over the past two years have shown that the chemicals can cause cancer in humans and kill aquatic life in high concentrations. The substance has long been associated with lung cancer among roofers and asphalt workers, as well as skin and scrotum cancer among distillation workers, according to the National Institute of Environmental Health Science.

The lawmakers sent a letter to EPA Administrator Stephen Johnson asking the agency to conduct studies on how these sealants increase concentrations of PAHs in watersheds, and how those PAHs affect human health and the environment.

According to the USGS, parking lot sealants may contribute to more than 90 percent of the PAH pollution in urban watersheds. And USGS studies in Austin showed that particles in runoff from the sealants had concentrations of PAHs that were about 65 times higher than concentrations in particles washed off uncoated parking lots. Currently, the use of coal-tar based sealcoat is not federally regulated.

EPA INTRODUCES RENEWABLE FUELS REGULATORY SYSTEM

The U.S. Environmental Protection Agency (EPA) took a step toward implementing the most publicly discussed portion of the 2006 Energy Policy Act by proposing a regulatory system that will nearly double domestic biofuel use.

The regulation, the Renewable Fuel Standard (RFS), establishes a credit-trading system that will mandate the use of 7.5 billion gallons of ethanol nationwide by 2012 -- up from 4 billion gallons this year.

EPA touted the proposed rule as a significant step to reducing both domestic gasoline use and some air pollutants, as well as providing a boost to the agricultural sector. The agency estimates that by 2012 the mandate will reduce petroleum consumption by slightly more than 1 percent of the petroleum that would be used in the transportation sector. EPA's analysis also estimates the mandate will result in reduction of several pollutants -- carbon monoxide emissions will be cut by 1.3 to 3.6 percent, benzene emissions will be cut by 1.7 to 6.2 percent and greenhouse gas emissions will be reduced by 0.4 to 0.6 percent.

But the increased ethanol use is also anticipated to increase emissions of volatile organic compounds plus nitrogen oxides by up to 97,000 tons.

Besides just officially putting in place the mandate, EPA's far-reaching proposal outlines a complex credit-trading system that will be used to regulate the ethanol market. EPA's proposal identifies exactly who can generate credits for ethanol, how the credits can be transferred and the different values for credits depending on certain types of fuel.

Sources: Environment and Energy Daily; Greenwire; The New York Times; The Washington Post

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